Treasurys fall as equities gain ground

Weak economic data largely ignored

By

DeborahLevine

NEW YORK (MarketWatch) -- Treasury prices declined Wednesday, with yields moving higher for a second straight session, as overseas and U.S. stocks rose amid hopes that stimulus measures said to be in the works in China could give rise to a global economic rebound.

Ten-year note yields
TMUBMUSD10Y, +0.64%
jumped 12 basis points to 3.00%. The securities have only closed that level once in nearly a month. One basis point is 1/100th of a percentage point.

Some analysts also noted trepidation in the bond market surrounding how much debt the Treasury Department is scheduled to sell next week.

It will formally announce the amounts on Thursday. Tom di Galoma, head of U.S. government bond trading at Jefferies & Co., pegged the amount at more than $60 billion.

The government will auction $33 billion in 3-year notes on Tuesday, according to Wrightson ICAP, a research firm specializing in government debt. That will be followed the next day by $17 billion in 10-year debt and $10 billion in 30-year bonds on Thursday.

'The seasonal patterns in the 10-year sector are entering one of the most bearish periods of the year.'
David Ader, RBS Greenwich Capital

Both the latter long-term debt sales will be reopenings, meaning the debt sold will carry the same coupon and mature on the same date as the most recently issued securities. For the longer-dated bonds, it will be the first reopening a month after the original issue.

Bonds stayed down even after ADP Employment Services said that companies slashed 697,000 private-sector jobs in February. Read more on ADP.

The report comes two days before the government's closely watched monthly report on nonfarm payrolls. Economists surveyed by MarketWatch expect the Labor Department to say on Friday that the economy lost 640,000 jobs last month.

Treasurys often advance on bad news, as investors seek a safe place to park their assets. U.S. government bonds also shrugged off a report showing the service sector of the economy contracted further last month.

The Institute for Supply Management's index on the non-manufacturing sector fell to 41.6 from 42.9 in January. Analysts expected it to fall to 41. See more on ISM data.

Federal Reserve regional banks noted that the downward pressure on the economy continued to spread to other sectors. In the so-called Beige Book, Fed officials also said bank lending declined, in part because of less demand for loans.

Bearish season

Benchmark 10-year notes are also coming up to a period of the year when yields frequently rise, following the Treasury's quarterly refunding in March and stretching until the May refunding, according to RBS Greenwich Capital.

Between 2000 and 2008, 10-year yields increased 19 basis points on average over that period, strategists wrote in an email.

"The seasonal patterns in the 10-year sector are entering one of the most bearish periods of the year," said David Ader, head of government bond strategy at RBS Greenwich Capital.

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